Markets opened with a gap-up of nearly 500 points. Before trading began Rajan, who had focused on quelling inflation since taking office in September 2013, lowered the benchmark repurchase rate to 7.75 percent from 8 percent, the first reduction since May 2013. As the day progressed, participants, both domestic and foreign, stepped up purchases.
Investor wealth reclaimed the Rs 100-lakh crore mark. Buying was seen across-the-board as all 12 BSE sectoral indices ended with gains of between 0.44-7.99 percent.

READ HERE: Rate cut is positive for Indian economy: Arun Jaitley

The BSE Sensex resumed at 27,831.16 and then touched over one-month intra day high of 28,194.61 before closing at 28,075.55, a jump of 728.73 points or 2.66 percent. Previously, it had soared by 2,110.79 points on May 18, 2009.
HDFC, ICICI Bank, ITC, RIL, SBI, HDFC Bank and L&T led the 28 gainers in the 30-share BSE Sensex.
The NSE Nifty opened at 8,424.50 and surged to 8,527.10 before closing at 8,494.15, up 216.60 points or 2.62 percent. As many as 46 constituents surged in the 50-share Nifty index.

READ: RBI rate cut signals shift in policy direction: CEA

"We believe that this is a beginning of a big rate cut cycle. We expect a further 125 bps over the next 12 months," said Morgan Stanley analyst Chetan Ahya in a report.
The rate cut ahead of a scheduled RBI policy meeting on February 3 will result in "more money in the hand of the consumers," Finance Minister Arun Jaitley said, while bankers started cutting rates within hours of the announcement.

Besides, a strengthening rupee which was trading over one percent higher at 61.35 against the dollar (intra-day) also buoyed the trading sentiments.
Most Asian stocks ended higher after India cut rates. Key benchmark indices of China, Hongkong, Japan, Singapore and South Korea rose by 0.03 percent to 3.54 percent while Taiwan's weighted average eased by 0.16 percent.

European markets were trading mixed as investors weighed company earnings results. Key benchmark indices in France and the UK eased by 0.47 percent to 0.56 percent while Germany's DAX was quoting higher by 0.13 percent.
Meanwhile, provisional data showed Foreign Portfolio Investors sold Indian shares worth net Rs 69.7crore yesterday.

Read More: Private insurers welcome RBI's move to ease interest rates

Coming back to the Sensex, major gainers include HDFC (7.16 percent), SBI (5.02 percent), ICICI Bank (4.60 percent), L&T (3.61 percent), Tata Power (3.55 percent), RIL (3.54 percent), M&M (3.10 percent), Maruti Suzuki (3.04 percent), ITC (2.76 percent), Axis Bank (2.57 percent), HDFC Bank (2.56 percent) and Tata Motors (2.33 percent).
The surprise rate cut has lifted spirits, say experts.

ALSO READ: Finance Ministry welcomes RBI rate cut as inflation drops

"Indian markets were languishing for past few sessions due to lack of any triggers. This is a good enough trigger for markets to cheer. RBI has let down its guard a bit and clearly spelt out its comfort on inflation. Now, if reforms also come in, India could be in a sweet spot for this year as well as beyond," said Kotak Securities CEO Kamlesh Rao.
Among the S&P BSE benchmark indices, Realty rose by 7.99 percent, followed by Bankex 3.29 percent, Capital Goods 2.40 percent, Auto 2.13 percent, Power 2.10 percent, Oil&Gas 2.01 percent, FMCG 1.35 percent and Consumer Durable 1.11 percent.
Total market breadth turned positive as 1,720 stocks ended in the green, 1,174 finished in the red and 112 ruled steady. Total turnover rose to Rs 4,305.55 crore from Rs 3,205.62 crore yesterday.

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RBI surprises by slashing interest rates by 0.25 percent



New Delhi: The Reserve Bank of India (RBI) on Thursday cut the repo rate by 0.25 percent with immediate effect and the cash reserve ratio (CRR) remains unchanged at 4 percent.


The RBI's next meet is scheduled for February 3.


RBI governor Raghuram Rajan initiated as per his priority of bringing inflation under control, however expectations had been high for a cut at the February 3 meeting.


The RBI's move comes after the Wholesale Price Index (WPI) based inflation moved up marginally in December to 0.11 percent from zero level in November, reversing the six month declining trend.


The slight increase in inflation rate was due to spurt in 'food items' basket. Food inflation in December moved to 5-month high of 5.2 percent, as per the government data.


While inflation in pulses, vegetables and fruits was higher in December over the previous month, it eased in wheat, milk and other protein rich items like egg, meat and fish.